Column : You get what you pay for & it’s not much
The US is an extreme outlier in the currently rich world. Fully 15% of the population is not covered by health insurance. The poorest are eligible for the public programme Medicaid and most people are employed in the formal sector and have coverage through their employers. This leaves 15%—too rich for public assistance, usually too poor (or too young or too casually or self-employed)—without. This is a shockingly high number for a country plenty rich enough to cover everyone.
However, India has virtually no health insurance in the private sector. Readers of this paper may find this a strange statement since a goodly fraction may well have such coverage, but readers of this paper are a strange (ie, very small and unrepresentative) sample of the population.
The new Rashtriya Swasthya Bima Yojna (RSBY) could, if executed as designed, reach the 20% or so who hold BPL cards, though whether these are the poorest people in the country is, at best, debatable. That leaves 80% without coverage. The difference between 20% covered and 80% covered is a qualitative difference, not just a large quantitative one. The US is grappling with taking the last steps towards universality. India has yet to take the first.
The qualifications I need to make for the previous paragraph point out other major differences between the countries. In one sense, we could say everyone in India is covered since everyone has the right to use the public system of care for all medical needs. But since the vast majority of people prefer not to use the public system—even for hospital care—it’s hard to argue that people feel themselves so well cared-for in the public sector. Except for former military personnel, there is no publicly supplied medical care in the US as there is very little publicly supplied medical care in the entire rich world. It is insurance that is publicly supplied, not care.
The US is concerned with runaway medical care costs. In the old days, simple insurance paid for medical care as determined and as priced by doctors and hospitals, a situation with virtually no control on services provided or their costs. That concern has already led to a major change in the way healthcare is paid for over the 15 years since the Clinton administration tried to solve the healthcare problem. Now, only a small minority of people are covered by old-style health insurance, a larger share is covered by various forms of “managed care” where some limitations are put on what procedures are done and what the insurer will pay for them. This may well have slowed the increase in costs but they are still on the rise and still a cause for concern.
India has ‘solved’ the runaway cost problem differently. In the private sector, there is no third party insurance and a majority of people are very poor and simply can’t afford modern, high-tech, medicine. There is a distinct limit to what can be paid in the private sector—the sector of choice for the vast majority. In the public sector, the problem can be solved by simple budget decisions and has been solved by not paying very much.
The consequence of this has been to get what you pay for: not very much. Research has shown that the private sector is probably prescribing too many antibiotics—a serious problem but not really because it amounts to large sums of money. The same research shows the public sector simply doesn’t do enough even with the money it has through high absentee rates and cursory care that sometimes amounts to refusal to treat patients.
The other major difference between the US and India is the heavy reliance of the former on tax deductions for health insurance paid for by employers. While at the centre of the debate in the states, it relies, obviously, on the overwhelming majority of employment being in the formal sector. They’re the only ones who pay taxes for which the deduction is relevant. India, of course, has only a small proportion of its workforce in the formal sector. These are already burdened by dozens of laws and don’t need any more piled on them.
Now, to see any common ground between the problems of India and the US, we have to look at the deeper incentive issues that all insurance schemes introduce and the way in which medical care suppliers respond to them. That’s a topic for a separate discussion.
—The author is Charles & Marie Robertson visiting professor of economic development, Woodrow Wilson School of Public & International Affairs, Princeton University
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